No Deductions for Abandoned Business Activity

In one case, a couple wanted to start a real estate consulting business, took a course about it and printed up stationery and business cards. They never actually began any money-making activity. The IRS disallowed their deductions, and the Tax Court agreed with the IRS. Ordinary and necessary expenses are deductible only if paid in carrying on a trade or business. A mere intention to do so isn’t enough. The fact that no income is earned is not necessarily fatal, but there must be actions to begin earning it; here there were none. #IdeaoftheDay